The current inflation rate in the United States is 8.2%, so it is not surprising that people are feeling anxious about the future.
So anxious that many are no longer contributing to their 401(k)s.
Given the current prices of food, gas, and shelter, it’s easy to see why people make this 401(k) mistake during inflation. While it is tempting, this 401(k) mistake may be one you may regret.
An Alarming Number of People Are Making This Mistake
A recent study by Allianz Life Insurance of North America found that American workers are struggling with inflation. One of the main ways they are “handling” their struggles is by cutting back or halting their 401(k) contributions.
Here are some of the findings¹:
54% halted or reduced their 401(k) and other retirement savings between July and September.
62% worry that a major recession is right around the corner.
67% say they are nervous about investing but don’t want to miss out on a recovery.
Also, millennials were the most likely to stop or slim their retirement savings due to inflation (65%), followed by gen xers (59%) and baby boomers (40%).
More than half of American employees are making this 401(k) mistake during inflation. And we get it. Inflation is taking a toll on many of us.
A survey by Mercer found that “75% were significantly financially stressed because of inflation and market volatility.”²
During these uncertain times, people are taking on additional jobs to cover the costs of inflation to afford basic necessities.
In addition to taking on more work, the study also found that “43% admitted dipping into retirement nest eggs to cope with the higher cost of gas, utilities, health insurance and foods.”³
The Issue with Cutting Back on Your 401(k)